A utility function is given as
u=m
where B represents quantity:I of haul-rs consumed and M represents
magazines. This utilityr is shown via indilTerenoe curves in the diagram to
the right.
The level of utility at point [bundle] T is 173 cfw_round your
A utility function is given as
U=1|'MB
where B represents the quantity of books consumed and M represents
magazines. This utilityI is shown via indilTerenoe curves in the diagram to
the right.
If the quantity of books is held constant at 20 units, then th
Both Sally and Sam receive a 10% raise in a single year. Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef.
'iIFA. This is only possible if Sally considers ground beef a normal good and Sam views it as an inferior
Assume that leisure is a normal good and that for a wage increase, the
substitution eect dominates the income eftect.
Use the line drawing fool' to draw an appropriate labor supply curve. Label this line
. s.
L _
IE1
Celelully rollew the lnstnlcflons abov
The marginal rate of transformation of yr fcrx represents
C:- . the siege of the budget constraint.
C:- B. the rate at which the consumer must give up 3r to get one more x.
(:2- C . px
p5,
-:"_*- D. All of the above.
A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $1.00 per loaf and the price of coffee is $0.50 per cup.
What is the relative price of bread to coffee? (bread per unit of coffee? 05 (enter your response
In tracing out a prichconsumption cunre cfw_FCC for good X, which of the following 1.I'an'ahles is held constant?
C:- A. Consumption of all other goods.
C:- B. The price of good X
C:- C. Consumer satisfaction cfw_utility
-:"_.*- D. Consumerincome
A movement upward along an upward sloping Engel curve corresponds to
. a rotation in the budget constraint.
. crossing indifference curves.
. a parallel shift in the budget constraint.
. upward sloping indifference curves.
Concept Question 3.2 cfw_It
Assume that an individual only consumes two goods: bread and coffee. Bread is a normal good.
For a decrease in the price of bread, the income effect and substitution effect will work in the same direction and the demand curve
AmuneIhasWpamMIobespelmbookscfw_gcxB)andDVDscfw_good Q
B). 12
11
Mallietplica aleasiolows:
PB=$40a|1dPD=$40.
the cfw_be line drawing tool to plot is mailers budget constrain. Label llis he
'Budget'. ?
DVDS
Carahry renew the insfmons above, and only dr
If the prices of both goods and income increase by the same percentage, what will happen to the budget line?I
-:':,2- A. The budget line shifts outward without a change in slope.
j:- E. The budget line rotates outward trom the intercept on the axis at the
Michelle spends all her money on food and clothing. 1u'lll'hen the price of clothing
decreases, she buys more clothing.
In the diagram to the right, the substitution effect is dened by the movement
from point A to B.
In the diagram to the right, the inco
A consumer is choosing between magazines and books. His indilTerenoe
curves and budget constraint are shown on the graph to the right. '
lfthe price ofa book is $10, what is this consumer's level of income? 5
$ 4M . . .
Suppose that
Under what conditions does the income effect reinforce the substitution effect?
The income effect will reinforce the substitution effect for a normal good.
Under what conditions does it have an offsetting effect?
The income effect will have an offsetting
The indifference curves for left shoes and right shoes would most likely be
2' A. downward sloping and straight lines.
'1. .2' B. upward sloping and concave to the origin.
2' C. downward sloping and convex to the origin.
'i.*- D. L - shaped.
Given Ihe relaanal: between margiial income tax rates and tax revenue, if tax
rates 3642), apoicy to nulchmge tax rates waldbemiedtoi'icrease
total tax revenue.
Tax Revenue is. trillions
D 1D2DD4-Dl091m
Marginal Tax Rates we.
If Jose Marias utility function is
U|[B,Z=AB Z ,
what is his marginal utility of B?
Jose Maria's marginal utility of B cfw_HUB is
V
_ 1
MUB AB Z
What is his marginal rate of substitution between B and Z? (Assume good Z is measured on the graph's horizonta
If Freds marginal utility of pizza equals 10 and his marginal utilitv pf salad equals 2, than
C:- f-i. he will eat five times as much pizza as salad.
C:- B. he would give up 5 pizzas to get the next salad.
* C. he would give up 5 salads to get the next pi
In the diagram to the right, we have five different combinations of movies and
books. Combination A represents 2 movies and 3 books. Combination C
represents more books (7] and the same number of movies [2]. Points B, E, and
F are other combinations with
Boyd has the following utility function:
U = 100346
where B represents hooks and C represents audio CDs
Boyd curreme consumes 8 units of good B and 4 units of good C.
His total level of utility is 1,6ii_i [round your answer is one decimal place.
1ll'llhic
Boyd has the following utility function:
U = mus-IE,
where B represents books and C represents audio CDs
Bundle A contains 1 unitls at good B and 49 units of good C.
Bundle E contains 5 units ot good B and 25 units of good C.
Which bundle does he preter?
In the diagram to the right, we have ve different combinations ot movies and a
books. Combination A represents 2 movies and 3 books. Combination C 10
represents more books [7 and the same number of movies [2. Points B, E, and
F are other combinations with
Suppose that the price of a good decreased.
The substitution etfect shows the change in consumption tor all goods in reaction to a change in relative prices holding utility constant
The income effect shows the change in consumption for all goods in reacti
0n the diagram to the light is plotted a single bundle of 4 books and 4.5 DVDs
consumed per month. This bundle is a point on the consumers budget constraint.
It the price 0! one book is $67.50 and one DVD is $60.00. then the consumers
level of montth inco
Ev selecting a bundle where MRS = MRI the consumer is
C:- A. achieving a comer solution.
C:- B. not behaving in an optimal wav.
ilk-C. reaching the highest possible indifference curve she can aord.
C:- D. All of the above.
A n economy is experiencing a recessionary gap. The government can _ _
Ci A.
raise taxes or decrease the quantity of money to decrease long-run aggregate supply
C B.
increase expenditure or cut taxes to increase short-run aggregate supply
~ C.
increase ex
Given the inditterence curve shown to the right:
a. What is the marginal rate of substitution as you move from point C to point E? g
1
cfw_enter your answer as a fraction and note that the minus sign has been 3
added). 7,-
b. Would you expect
In the state lottery, Joe won an amount that pays $20 per day for life.
Use the iine waning too.J to show how these winnings affect Joe's
budget constraint. Label the new budget line 12'.
oaremrry rerrew me r'rrsrrrrcrr'errs above, and eniy draw a
Gleggcaunesdmdatecayhasaldaalgea Heisg'venZCindybas
m4om1ges.Hecmbuyorselcmdybsfor$26ach.Siniaiy.hecthy
arselmaa'lgefot. HQegghasmollrersmeofhcanatiawsbmf-get
ileameleequam_mlatis1emosthecmspend,\on1esegwis?
thing the ne waning Fool, gilt GIegg's budget m
After Joyce and Larry purchased their rst house, they made additional home improvements in response to increases in income. After a while, their income rose so
much that they could afford a larger home. IClince they realized they would be moving, they red
A consumer has $23!] in monthly income to he spent on two goods Z and B.
The price of good Z (P2) is $8.00.
The Marginal Rate oi Transformation (MRT) is equal to 2. That is 2 units of good B can be traded for 1 unit oi good Z.
What is the price of good B?